STOCKS
The concerns over the coronavirus outbreak in China is weighing on the market sentiment for now. As a result the global equities have declined. Dow is holding above 29000 and need to be seen if it can sustain above it. DAX and Nikkei look bearish and vulnerable to fall further. Shanghai has tumbled below 3000 yesterday. The Chinese markets will be closed for a week and will reopen on Thursday (30-Jan-2020). Sensex and Nifty have bounced yesterday but have key resistances ahead that can cap the upside and drag it lower again.
Dow (29160.09, -26.18, -0.09%) has bounced from the low of 28966.98 yesterday. It will have to be seen if it can sustain above 29000 or not. A break below 29000 can drag the index lower to 28750 – an important support which needs to hold in order to keep the view bullish and see a rise again.
DAX (13388.42, -127.33, -0.94%) has declined sharply and looks vulnerable to break the key 13400-13350 support zone. Such a break will pave way for a further fall to 13200.
Nikkei (23781.45, -13.99, -0.06%) has dipped below 23800. The bias looks negative on the charts. A fall to 23600 and even 23200-23000 looks possible while the index remains below 24000. As mentioned yesterday a strong rise past 24100 is needed to bring back the bullishness.
Contrary to our expectation Shanghai (2976.53, -84.23, -2.75%) has tumbled below 3000 yesterday ahead of their long Chinese New Year holidays. The markets will reopen after a week on 30-Jan-2020 (Thursday).
Sensex (41386.40, +271.02, +0.66%) has important resistance in the 41450-41500 region which needs to be broken in order to ease the downside pressure and take it higher to 42000-42200 again. But while below 41500 our bearish view is intact to test 41000 and even 40700-40670 on the downside in the coming days. We will have to wait and see.
Similarly, Nifty (12180.35, +73.45, +0.61%) has significant resistance in the 12200-12220 region. A strong rise past 12220 is needed to revisit 12300-12400 levels and negate our bearish view of seeing a fall to 12000.
COMMODITIES
Copper is headed towards important support while Gold and Silver are expected to rise towards immediate resistances. Crude prices trade lower despite slight crude inventory draw seen for the previous week. Overall Crude prices look bearish but could soon get some support from lower support levels as seen on the medium term charts.
Brent (62.00) and Nymex WTI (55.59) trade lower. Immediate support is seen near 62 and 55 respectively which if breaks could pull down prices towards 60 and 52 respectively in the near term.
Gold (1561.10) trades higher while Silver (17.79) looks stable. While 1540 and 17.50 hold as near term supports, we expect to see some ranged movement for the near term. Upside could be capped at 1580 for Gold and 18.00 for Silver in the very near term.
Copper (2.7275) has fallen sharply as the Yuan weakens. But downside could be limit 2.7250-2.70 in the near term before a bounce is seen.
FOREX
China is in for a week long holiday for Spring Festival admist the ears for the coronavirus. Maybe the bull run in USDCNY could come to a pause when the exchange rate opens for trade again on 31st Jan’20 after the week long holiday. Euro trades lower but we watch crucial levels for a bearish confirmation. EURJPY, USDJPY and Rupee also looks weak for the near term.
Dollar Index (97.70) is holding well above 97.10 and 97.30 just now and could rise to test 98 in the near term. Only a successive break below 97 would trigger a fall in the longer run.
Euro (1.1052) has indeed come down to test 1.1050 on a break below 1.1070 as mentioned yesterday. This is a crucial break below support on the daily candles and while it sustains a break below 1.1050, it may target 1.10 or lower in the medium term. Watch for a possible immediate bounce from current levels else view would turn bearish for the coming sessions.
Dollar-Yen (109.46) is bearish for a fall towards 109.20-109 in the near term before a sharp bounce is expected.
EURJPY (120.98) is down to test support near 120.78 as we have been mentioning for quite a few days now. Trading at crucial levels, it is important to see if it breaks immediate support to head lower or rises back towards 122-123 in the medium term. Watch price action near 120.78-120.50 region. A break on the downside would confirm bearishness for the coming sessions.
Pound (1.3121) trades higher and could test 1.32 in the near term before facing slight rejection towards 1.30. A sustained break above 1.32 is needed to turn bullish for the near term.
Aussie (0.6845) could get some rejection from 0.36900-0.6925 which could push the exchange rate lower towards 0.68 in the near term. But at the same time note that while above 0.68, there is fair chances of seeing a bounce back towards 0.69 or even higher in the medium term.
USDCNY (6.9363) has risen above 6.93 and could now have scope for a rise towards 6.95/96 in the medium term before a rejection is seen. The rise could be seen with some minor interim dips in the next few sessions.
Dollar-Rupee (71.2750) tested 71.3450 yesterday and it is important to see if the pair moves above 71.30 today to close at higher levels. A close above 71.30, if seen today would indicate a sharp rise towards 71.50 in the coming week. Watch price action near 71.30.
INTEREST RATES
The US Treasury yields are moving down in line with our expectation. The outlook is bearish and a further fall can be seen in the coming days. The German yields have moved down after the ECB meeting yesterday and have key supports coming up which need to hold in order to avoid further fall. The ECB kept the rates unchanged and announced the “Strategic Review” that will involve a review on inflation targets, policy tools etc. The Indian 10Yr GoI is at a key support level which if broken can drag it further lower.
The US 2Yr (1.51%), 5Yr (1.55%), 10Yr (1.73%) and 30Yr (2.18%) Treasury yields continue move lower in line with our expectation. The bearish outlook is intact. The 30Yr has come down towards 2.17% as expected and is likely to extend the fall to 2.10%. The 10Yr on the other hand can move down to 1.65% on a break below 1.70%.
The German 2Yr (-0.61%), 5Yr (-0.57%), 10Yr (-0.31%) and 30Yr (0.20%) yields have declined across tenors in line with our expectation. . The 10Yr has a key support near current levels. Inability to bounce from here can drag it to -0.37 and -0.40% in the coming days. The 30Yr on the other hand has room for a dip to 0.17% from where a bounce is possible.
The 10Yr GoI (6.6007%) is poised at a key support level of 6.60% which needs to hold in order to produce a bounce to 6.65% again. . In case if the yield declines below 6.60%, a fall to 6.53% and 6.50% is possible thereafter which will then negate our bullish view of seeing a rise to 6.75%.
